UK Edition
Locals in the Welsh seaside resort of Mumbles and the picturesque North Yorkshire town of Hawes, the home of Wensleydale cheese, were rocked earlier this year after their last remaining bank branches unveiled plans to close.
After years of bank closures across UK high streets, Lloyds decided to shut its branch in Mumbles, while Barclays and HSBC said they were shutting in Hawes, leaving residents facing a 33-mile round trip to their nearest branch.
Frustrated that they were being cut off from their money by cost-cutting (one resident said at the time some elderly people had “sleepless nights” over the move), the Hawes community fought back.
The successful campaign – which prompted Newcastle Building Society to open in the town while Barclays abandoned plans to close its cash machine – sent a clear message to the big banks they could not retreat from high streets without a fight. But then came coronavirus.
The pandemic has dramatically accelerated the shift to online banking. High street footfall has slumped due to lockdown, while cash is being shunned by shops and customers. Last week alone, Barclays, NatWest and TSB all announced fresh cutbacks.
NatWest and TSB said that around 1,500 jobs would go from bank branches, and TSB plans to phase out specialist cashiers.
Barclays, where footfall is down up to 60pc compared with pre-Covid levels, said it would close two branches in London later this year after finding one was only being used by 80 people. More cuts are expected in the coming months.
HSBC is to close 28 branches later this year, while Lloyds is months away from unfreezing its plan to axe 56 branches, something it aims to do by early next year at the latest after pausing the cuts due to coronavirus. Virgin Money has also dusted off plans to shut or merge 52 branches.
The reductions were decided before the pandemic, but there are concerns coronavirus could be used as an excuse for banks to further retreat from the high street. As it put 1,000 branch jobs at risk last week, TSB explained that Covid-19 had accelerated the use of digital services.
However, Russell Galley, who is in charge of Halifax branches at Lloyds, warns his rivals against slashing further outlets as a direct result of the crisis. He argues that only a small number of customers who previously never used online banking have begun adopting it during lockdown.
“We’re definitely seeing some material changes in customer behaviour, and a general reset that would have taken three to four years to get to [if coronavirus hadn’t happened],” he says. “But banks need to be careful not to make changes that might be premature – only a small proportion of previous heavy branch users have now become digitally active. If they haven’t become digitally active in this extreme time, it’s unlikely they will going forward.”
Fears that coronavirus will be the end of bank branches come at a time when reports of long queues during lockdown, and anger that branches are still operating on reduced hours when shops and pubs are open as normal, suggest there is still strong demand for a physical service.
In the last five years, 55 bank branches have been closing every month, according to Which, reaching a peak in 2017 when 868 sites were lost around the UK, the equivalent of more than 70 a month.
Some 794 branches closed in 2018 and 443 in 2019. The constituency of Wentworth and Dearne, in South Yorkshire, now has no banks at all.
The battle to preserve remaining branches was high on MPs’ agenda even before the pandemic.
Barclays came under fire from the cross-party Treasury select committee late last year after it said it would stop offering Post Office banking users access to physical cash, triggering a rethink. However, the pandemic has put a further emphasis on online banking and placed bosses under even more pressure to slash costs.
Investment bankers hunting for deals are hopeful big lenders might pair up with online-only rivals.
“The lack of need for physical banks has never been more apparent than the last six months, so where do the heavily branched banks move to? One area ripe for consolidation is fintech,” says the head of M&A at one major bank.
“We’ve been talking about this shift [to online] for five to 10 years but this is a tipping point.”
Yet the shift to online does not mean banks can get away with removing their high street presence altogether, and alternatives are being discussed.
Mobile branches – introduced as a solution to customers in remote areas – have largely been paused due to concerns around social distancing, so other ideas are being tabled.
Using community halls on certain days of the week is one idea, while shared branches is another and is being piloted in certain areas.
Natalie Ceeney, chair of the government-backed Access to Cash Review who spearheaded the pilots, says even though people are using less cash, “it is becoming problematic if consumers and businesses are unable to access or deposit cash, particularly in more remote and deprived areas”.
She adds: “We need to acknowledge the economics of maintaining the cash infrastructure when cash could soon be as low as one in 10 transactions, compared to six in 10 years ago.”